Sanders had rejected offer of Jason Hughes to do the job for free

San Diego has taken the offer of its former lease negotiator to help re-up city leases for 515,000 square feet of downtown office space at no charge, according to a Wednesday news release from Mayor Bob Filner.

The release was sent to the region’s media on Wednesday, two days after U-T Watchdog asked for an update on the city’s office space plans.

On Tuesday, the city canceled the award of a contract for the services to another company -- upsetting at least one participant in a competitive bid process.

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The Watchdog broke the story in May 2012 of how lease expert Jason Hughes had offered to do the negotiations for free but was turned down by Filner’s predecessor, Jerry Sanders. Hughes is president and CEO of the tenant representation firm Hughes Marino and the man who last negotiated all three of the city’s downtown leases.

According to the release, Filner has appointed Hughes to a position as special assistant to the mayor, and will advise the mayor on the city’s downtown office real estate needs.

Hughes’ 25 years of commercial real estate experience will come at no cost to the city, according to the release.

“I appreciate Jason’s commitment to public service in this advisory role, which he will perform without compensation from any party,” Filner said in the release.

Hughes referred comment to Filner’s office for this story. Previously, he estimated the cost of renegotiating the city’s three downtown leases would be about $1 million.

The city’s current cost for occupying the three downtown towers totals $13.1 million per year, according to a September 2012 office space analysis the city commissioned.

Hughes’ appointment comes just one month before the expiration of one of the downtown leases, at 600 B Street, for 139,000 square feet. Commercial real estate experts say they recommend their clients start negotiating leases of that size at least two years before they expire, which was pointed out in several stories while Sanders was still the mayor.

It is not known whether the city has begun renegotiating the 600 B Street lease, as Filner’s office has not answered the questions submitted on Monday. The city’s two other leases for downtown office space both expire in about a year.

Gary London, president of The London Group Realty Advisors in San Diego, said a tenant waiting to renegotiate a 139,000 square-foot lease one month before it expires would be unprecedented. Nonetheless, he said the city is in a good position due to real estate market conditions downtown.

“The city is not operating smartly, and if they were a private company they would have resolved this issue a year ago or at least six months ago,” London said. “They just happen to be the luckiest non-private company in town right now, because the office market is not that strong and they have a lot of options.”

Hughes’ offer to renegotiate the leases for free first came in August 2011, and was rejected by Sanders in favor of launching a competitive bid to find a company to accept payment to represent the city. Not taking no for an answer, Hughes submitted a bid for $1.